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2023 (3) TMI 1418 - AT - Income TaxValidity of assessment u/s 153A - incriminating material found during the course of search or not? - HELD THAT - As in case of this assessee the addition if any to be made up to A.Y. 2013-14 shall be based on incriminating material found during the course of search. For A.Y. 2014-15, the assessment would be made under Section 143(3) read with section 153A of the Act on the basis of information contained in the return of income as well as any information available with the learned Assessing Officer during the course of search. In nutshell, for A.Y. 2014-15, there is no requirement of any incriminating material found during the course of search. The fact also clearly shows that assessee has originally made a statement during the course of search about providing accommodation entries. This statement was also recorded in case of other assessees. The statement originally made by the assessee was retracted. Whether on the basis of statement made by the assessee any absence of any other incriminating material, addition can be made or not in concluded assessment years? - The answer has been given by the Hon'ble Delhi HC in case of PCIT vs. Best Infrastructure (India) (P.) Ltd. 2017 (8) TMI 250 - DELHI HIGH COURT wherein the question of law framed held that the addition made under Section 68 of the Act on account of statement made by the Assessee's Directors in the course of search under Section 132 of the Act were rightly deleted by the ITAT. Having regard to the materials seized in the course of search under Section 132 and the statements made on behalf of the Assessee, the assumption of jurisdiction under Section 153A of the Act and the consequent additions made by the AO are not justified. Statements under Section 132(4) of the Act do not by themselves constitute incriminating material. See CIT v. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT and CIT v. Continental Warehousing Corpn. (Nhava Sheva) Ltd 2015 (5) TMI 656 - BOMBAY HIGH COURT . The co-ordinate Bench in M/s Kuber Khadyan Pvt. Ltd 2021 (3) TMI 1159 - ITAT DELHI deleted the addition based upon the admission under Section 132(4) of the Act, holding that mere statement is not a incriminating material. Based on which addition can be made in the hands of the assessee. Thus we find that the addition has been made in the hands of the assessee from A.Y. 2008-09 to A.Y. 2013-14 which based on retracted statements. In these circumstances, merely a statement of the assessee where there is no admission of the income cannot be said to be incriminating evidence. Consequent to that the additions made by the learned Assessing Officer and by the learned CIT (A) are not sustainable. Hence, they are directed to be deleted. With respect to A.Y. 2014-15 when the search took place, there was no material found at the premises where the business of the assessee was stated to be carried on supporting the books of accounts of the assessee. No evidences, except the books of accounts, purchase and sales invoices and bank statement was produced before the learned that lower authorities. Merely producing documentary evidences without actually supporting that in fact such transactions have taken place in ordinary course of business, the books of accounts of the assessee cannot be stated to be showing the correct picture. It is the duty of the assessee to substantiate the transactions of purchases and sales of diamond with proving the chain of the business transaction with proper evidences. The learned AO has also rejected the books of accounts merely on the basis of the statement as well as absence of evidence of carrying on of the business actually by the assessee at the time of search. In view of this facts, we set-aside the issue of determination of the fact of actually carrying on of business by the assessee of purchase and sale of diamonds to the file of the learned assessing officer with direction to the assessee to substantiate that in fact assessee is carrying on the business and not merely an accommodation entry provider. AO is directed to examine the purchase and sales invoices as well as other evidences of each part of the chain of the trading and then decide whether the assessee is engaged in the business or is merely an accommodation entry provider. Appeal of assessee allowed for statistical purposes. Validity of reopening of assessment - AY 2007-08 - HELD THAT - Reopening has been made on the basis of reasons recorded by the learned assessing officer wherein the information is received from the investigation wing . Further search was carried out in case of Shri Gautam Jain and others in his group. It was found that assessee is part of that group. We find that there is a tangible material available with the learned assessing officer to reopen the assessment in case of the assessee. In view of this, we do not find any infirmity in the order of the learned assessing officer in reopening the case by issuing notice under section 148 of the act. The learned CIT-A has also confirmed the same for the reason that the learned assessing officer has tangible material. Therefore, all the grounds challenging the reassessment proceedings are dismissed.
Issues Involved:
1. Validity of jurisdiction under Section 153A without incriminating material. 2. Additions based on retracted statements. 3. Rejection of books of accounts and estimation of income. 4. Enhancement of income by the CIT (A). Summary: 1. Validity of Jurisdiction under Section 153A without Incriminating Material: The Tribunal examined whether the Assessing Officer (AO) had valid jurisdiction under Section 153A of the Income-tax Act, 1961, in the absence of any incriminating material found during the search. It was noted that the search took place on 3 October 2013, and the assessments for the years up to 2013-14 were concluded. The Tribunal held that for these years, additions could only be made based on incriminating material found during the search. It was observed that no such material was found, and the additions were made solely on the basis of retracted statements. The Tribunal referenced several judicial precedents, including the Hon'ble Delhi High Court's decision in PCIT vs. Best Infrastructure (India) (P.) Ltd., which held that statements under Section 132(4) do not constitute incriminating material. Consequently, the Tribunal allowed the appeals for the assessment years 2008-09 to 2013-14, as the additions were not based on any incriminating material. 2. Additions Based on Retracted Statements: The Tribunal considered whether additions could be made based on retracted statements in the absence of any other incriminating material. The Tribunal referred to multiple judicial precedents that held that retracted statements alone could not be considered incriminating material for making additions. It was noted that the statements made by the assessee and other parties were retracted, and there was no admission of income. Therefore, the Tribunal directed the deletion of additions made for the assessment years 2008-09 to 2013-14. 3. Rejection of Books of Accounts and Estimation of Income: For the assessment year 2014-15, which was an open assessment year at the time of the search, the Tribunal examined the AO's rejection of the books of accounts and estimation of income. The AO had rejected the books of accounts based on the absence of evidence of actual business activity during the search and relied on statements indicating that the assessee was providing accommodation entries. The Tribunal set aside the issue to the AO to determine whether the assessee was engaged in actual business or merely providing accommodation entries. The AO was directed to examine the purchase and sales invoices and other evidence to substantiate the transactions. 4. Enhancement of Income by the CIT (A): The Tribunal also addressed the enhancement of income by the CIT (A) for various assessment years. The CIT (A) had enhanced the income based on the estimation of accommodation entry commission. The Tribunal, following its findings on the validity of jurisdiction and the basis for additions, directed the deletion of such enhancements for the assessment years 2008-09 to 2013-14. For the assessment year 2014-15, the issue was set aside to the AO for fresh determination. Conclusion: The appeals for the assessment years 2008-09 to 2013-14 were allowed, and the additions based on retracted statements were deleted. For the assessment year 2014-15, the issue was set aside to the AO for fresh determination. The Tribunal's decision was based on the absence of incriminating material and the reliance on retracted statements.
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